Delaware Chancery: PBC Directors Shielded by Statutory Safe Harbor; Revlon Does Not Apply
Delaware PBC boards and their counsel now have first judicial guidance confirming that Revlon's exclusive stockholder-value mandate does not govern change-of-control transactions and that DGCL Section 365(b) safe harbor can dismiss fiduciary-duty claims at the pleading stage.
In Drakes Landing Associates v. Tilden Park Capital Management, Vice Chancellor Cook held that DGCL Section 365(a)'s balancing mandate displaces Revlon's single-minded value-maximization standard of conduct for PBC directors, while leaving open whether a modified 'PBC enhanced scrutiny' standard of review applies. The court dismissed all claims under Section 365(b)'s safe harbor, finding plaintiffs failed to plead facts showing the special committee's rescue-financing decision was uninformed, interested, or beyond ordinary sound judgment. The opinion also extends Section 365(b) to defeat aiding-and-abetting claims, since the safe harbor deems fiduciary duties satisfied rather than merely barring relief. PBC boards should expect heightened pleading burdens on the informed prong—covering all three Section 365(a) interests, not just pecuniary ones—and should document balancing analyses and committee processes accordingly. The decision materially reduces litigation risk for PBC boards in M&A and rescue financings, but the unresolved 'PBC enhanced scrutiny' question warrants continued monitoring.